Curious, I talked to Mike Jacoubowsky, owner of Chain Reaction Bicycles in Redwood City, California, about this. Mike, an intelligent and gracious man who is insanely in love with bikes, has been a Trek dealer for decades. His store is big and beautiful. When I was a wholesaler I loved calling on him.

I knew he would have given Trek's plans a lot of thought. He was kind enough to send me an extended piece explaining his view of the situation. Since Trek's move is potentially market-changing (other companies are watching Trek and if Trek is successful, they plan to jump in), Mike's important essay is the only piece I posted on today's news page.

Mike's essay:

I am not anti-internet, not for content, nor for sales. There will be times when the traditional brick & mortar store just doesn’t work. People’s lives are busier than they used to be, and we need to get away from thinking we’re simply competing with other businesses for dollars and realize that what we’re competing for is a piece of their time. It is my shop’s responsibility, as a retailer, to try to optimize our business for our customers, which means meeting them when and where they want. You can believe the world was a better place before you could buy stuff you wanted (but didn’t really need) on-line, but nobody can turn back the clock.

Our customer’s timing might not fit into our traditional store’s 11am-7pm availability. They might have time to buy something at 7am, or 10pm. So what are my choices? I can say fine, they can buy from Amazon. Or I can say tough, they need to buy from me when I’m open and support local business. Neither are winning approaches. Ideally there should be a way for me to take care of those customers, and there is. I can sell product through my own website. They can buy a pump or chainring or tire or whatever they might want on-line, and I can either have it ready to pick up at the store or, if need be, ship to them. Even then I restrict my sales to my local area; my expertise is not in mail-order fulfillment and shipping.

So where is my expertise? It’s in learning about the customer and knowing how to match the right product to their needs. That’s one of our core values, and whatever sales avenue our customer chooses, that cannot change. For on-line orders, this means the customer is contacted on every order, allowing us to make sure it’s the right product for them. For parts & accessories, 80% of the time the order goes through as placed. 20% of the time there needs to be some tweaking; maybe that’s not the right chain for that drivetrain, or there’s a better tire size for what they weigh and where they’re going to ride.

This is a blended buying/selling experience, combining the ease of ordering when and where the customer wants, with a sort of super-concierge service to make sure they’re getting the right product. It reflects taking what we do for everyone coming into the store and making that the standard for how our on-line customer is treated as well.

What about for bikes? Yikes, how many sizes do bikes come in? How many styles, and variants within those styles? How much does the customer weigh? What are the local cycling opportunities in the area? What about the customers’ actual needs vs wants? We allow on-line bike orders on our website as well, but of the 45 over the past year or two, I think 8 went through as originally ordered. We had a 280 pound 5’7” guy looking for an around-town bike and he’d ordered a 58cm Trek Speed Concept tri bike because it was on sale cheap. He ended up with a Trek Marlin 5 29er Mountain Bike and couldn’t be happier. We ensured this positive outcome by once again intercepting the sale (as we do with all on-line sales) and after quickly determining this wasn’t the right bike, had him come in so we could figure out what would be.

Any on-line program that doesn’t offer this service runs a great risk of the customer’s first introduction to their new bike being awkward or downright unpleasant. Nobody wants to think they did something wrong or feel stupid, but how easy is that to avoid when someone is told sorry, this isn’t going to work, you ordered the WRONG thing? We’re here to enhance a customer’s cycling experience and keep them from making bad choices. We want to make sure they buy a bike that they can’t walk past without wanting to get out and ride, every chance they get. We don’t want to sell to sell something that gets added to the pile of things in their life that seemed like a good idea, but didn’t work out.

You should now have a good idea how Chain Reaction Bicycles (a local bicycle retailer on the San Francisco Peninsula, not to be confused with a similar-named mail order operation in Northern Ireland) manages on-line sales in a way that is true to its core customer values, whether someone buys on-line or in the store.

But Trek has suddenly changed the world of bicycle retail. By the time you read this, Trek will be allowing customers to order, direct from Trek, both bikes & accessories. In the case of accessories, the product can be shipped directly (from Trek) to the customer. For bikes, the customer will choose a shop to have it delivered to, and that shop will assemble it for the customer and let them know when it’s ready. This is a markedly different model from delivering product from the dealer’s stock, and unless the concept has changed from its introduction this past summer, there is no opportunity for the local retailer to intervene and make sure the customer is getting what they need (size, model, appropriateness… all sorts of reasons why a retailer like us has over $1 million in inventory to satisfy customer needs).

For accessories, I don’t think this is such a huge deal. Somebody buys the wrong size tube from us (via our site or Trek’s), I can exchange it for them. But for a bike, how much is lost because the customer’s only interaction with the product was on a website? How often will the size be not-quite-right or simply the wrong bike for how it’s going to be used? There will be no opportunity to discover this before the bike is shipped to the retailer and assembled. The customer’s first impression could be less-than-ideal. As a retailer, I don’t think anything’s more important than when you first present the customer with their new bike. That first impression flavors their feelings for the bike brand, your store, and even their dreams of where they’ll ride. If we don’t optimize for that first impression, we’re no better off than the pure on-line play. Why do we want to give up that advantage?

Trek has repeatedly stated that Canyon is coming, Canyon is their biggest threat. Well yes, Canyon Bicycles are coming, and their pure on-line play in Europe has worked out well. But, Europe doesn’t have anywhere near the retail brick & mortar density (sq foot per person) of the US. Most estimates are greater than 3 to 1. When Apple helped shift buying patterns from getting what you need to buying what you want, the existing brick & mortar infrastructure couldn’t handle the load. On-line retailing came along at exactly the right time, and so yes, it’s true, if you weren’t on-line selling product you were missing a lot of opportunities. But this isn’t Europe. The consumer in the US doesn’t have a difficult time finding a local bicycle retailer. The US consumer for bicycle products has been able to avail themselves of a higher standard of service and selection, locally. Why would anyone want to trade that experience for a pure on-line ordering option, given the complex nature of the product? Who would want to stoop to Canyon’s level and completely discount what’s fundamentally different about you vs them? A Canyon bike might be made from the same materials and use the same parts as a Trek or Giant or Specialized. But it’s not nearly as nice a bike as a Trek or Giant or Specialized if it’s the wrong size or type for the customer. Not to mention you can test-ride the Trek or Giant or Specialized before buying (unlike the Canyon) and make sure it’s exactly what you want.

Of course, not if but when someone orders an inappropriate bike on Trek’s website, the dealer is expected to take care of things, putting that customer’s bike into their own stock (even if it’s a bike they don’t need because they already have plenty of them) and set them up with the right one. We will practice doing so in a manner that is as straight-forward and easy for the customer as possible, making sure we don’t imply to them they didn’t know what they were doing. But they’ll know, won’t they? Because they didn’t order the right thing; it’s that simple. It would have gone better had the dealer been involved earlier in the process.

This program is not optimized to accentuate the advantages between the local bike shop and the pure-on-line operation. It’s dumbing us down to their level, and teaching customers to believe there’s no loss of experience or quality ordering on-line. How can that be a good thing?

It’s Trek’s belief that opening up direct on-line sales will result in significant new sales opportunities for the local dealer, who will be compensated with approximately half the margin normally made for an in-store sale on accessories, and a service “commission” for direct on-line bike sales that reduces our normal margin on a bike by 8%, an amount which puts bicycle sales below our cost of staying in business.

If it were truly incremental sales and not a customer who’d come into our store but didn’t pull the trigger until later that evening in front of a computer, this model would have merit for us. If it enabled us to floor far less inventory, that also might rebalance the scales, allowing us to remain profitable. But the nitty gritty details are such that we still have to carry a huge selection of bike on the floor, partly because we believe the customer should be able to see and ride and compare, and partly because Trek’s dealer locater will tell a customer which store in their area has a given product in stock (an incentive to stock so the “I want it today” customer comes to you, not somebody else).

Historically, Trek has been an awesome supplier, treating their dealers as partners and teaching us to be better businesses. The product has been great, warranty support superb. A consumer won’t go wrong buying a Trek product. But this program feels like Trek thinks the dealer is in the way, standing between Trek and the consumer, instead of being fine-tuned to create the blended approach I’ve described above, an approach that enhances the on-line experience and strongly differentiates Trek and its dealers from the Canyons (and other pure on-line plays) of the bicycle world.

It’s my hope that Trek tweaks this program to make it truly awesome for all… for Trek, for their retailers, and for the consumer. In the meantime, it’s important for the consumer to understand that ordering a bike or product direct from Trek’s website, even when you choose a local dealer to have it sent to, does not carry the same benefits (to the consumer) as buying from that dealer directly, nor is the local dealer compensated as much for their work… despite the consumer paying the exact same price.

One last note. For the retailer, there is a lot of extra or “new” work to make a blended on-line sales program work. It’s not business-as-usual. It costs money to set up and maintain a website that allows customer orders (continuing expenses of about $600/month for SmartEtailing), it requires time to follow up on each order that comes through, and there’s a lot of maintenance keeping up with how inventory is presented on-line. Not all retailers are up to the task; many think they’re already doing enough and don’t want to change. I’m sure much of Trek’s program is borne out of frustration with many retailers who don’t stock enough product and perhaps the environment within their stores is unpleasant. I get that. Not all bicycle retailers should be in a retail, customer-serving business. But for many of us who are doing a good job, trying to keep up with the times and innovate, it’s tough not to feel like the rug has been pulled out from underneath us.

Poor retailers should be shown the door, rather than come up with a program that assures some bottom level of customer experience that becomes the new standard.